16 ms·

Corporate America Hasn’t Been Disrupted

200 points by japaget 12y ago

jcfrei 12y ago
Another simple explanation for the decline might be economies of scale or economies of scope (or both) . Thirty years ago they might have had a smaller effect on small businesses (like coffee shops and retailers), whereas nowadays complex logistics (economies of scale, ie. walmart) or versatile production facilities (economies of scope, ie. starbucks) have a bigger influence on profits.
rayiner 12y ago
I think there is a bit of cognitive dissonance in the tech community about "disruption" versus "big companies." Technology, in general, makes it easier to scale companies to large sizes, and "disruption" often involves using technology to enter an existing industry that is dominated by small, inefficient companies. A great example is Uber. Uber is making the taxi market a lot more efficient, but it's also well on the path to replacing a bunch of little local taxi companies with a big national one. That's the power of technology: it pushes out the point on the curve where diseconomies of scale cancel out economies of scale. Technology enables consolidation. Other good examples are the dry cleaning and food delivery startups. It's also not surprising that once an industry has been "disrupted" it takes a lot to push out the incumbent. Small businesses are generally inefficient and prone to failure. Large corporations are efficient and diversified in comparison. A new mom & pop coffee shop might easily out-compete the old mom & pop coffee shop across the street, but they can't offer the scale and uniformity of a Starbucks. When big corporations die, it's either because of their own mistakes, or some seismic market or technological shift (e.g. Kodak).
- snowwrestler 12y ago
  I think big music labels are another example of corporations that have been disrupted less than folks here on HN might think. Yes, iTunes changed the music industry, but who got killed? CD retailers, primarily. The bulk of music sold through iTunes is still licensed from big labels. Spotify licenses music from the big labels. Ads, TV shows, and movies license music from big labels. Heck even the most popular videos on YouTube are almost all the official Vevo versions of big-label songs. Piracy is harming album sales, but because big labels have so much financial leverage over new artists, they have simply started requiring "360" deals for a lot of new contracts, which give them a cut of all revenue streams: not just albums, but also tour revenues, merchandise, media appearances, sync licences (ads and movies), even publishing in some cases.
  - mason55 12y ago
    Reminds me of an article on /r/movies the other day about "XYZ didn't kill the movie industry, the movie industry killed itself". Well... no. The movie industry is far from dead and is doing quite well for itself. It even avoided the mistakes the music labels made when they gave Apple too much power (a mistake that they have since recovered from).
    - snowwrestler 12y ago
      Some labels/studios are being hurt by piracy, primarily the mid-size and smaller independents. They have less financial leverage over their artists, but more importantly, many of them choose to limit their relationships with artists to publishing and promotion, so they are more dependent on album sales for revenue. They also tend to more fan-friendly, so they generally choose not to fight against file sharing, etc. even though it hurts them. These are the "middle class" level folks in those industries--making a professional living, but not getting rich. That particular stratum is being eaten away by piracy. At the lower extremes of the industries, piracy is making it easier for new folks to get found and build an audience. But once they want to take the next step, they'll have a harder time staying out of the big company systems than folks 15 years ago. There are just fewer "mid-range" professional options available to them now.
      - anigbrowl 12y ago
        Exactly. The labels that have been worst hurt by the digital revolution were the least exploitative ones.
      - eruditely 12y ago
        These comments need to be hedges. With services like soundcloud and artists publishing their music and directly uploading new albums, a new method for payments that is not an over-extended method of sales and 'representation' based on antiquated physical formats will need to rise, and I welcome it.
- pessimizer 12y ago
  >Small businesses are generally inefficient and prone to failure. Also, small businesses have to make money now, or nearly now, before their angels run out. Large businesses can lose money for as long as it takes for the small businesses to fold, and will still attract investment that anticipates the future monopoly/monopsony pricing possible after all small firms close. Also, large companies can eat small competitors, or collude with each other (non-competes, patent truces) in ways that exclude the smaller actors. ----- Edit with a possible Uber future: Cab companies will start to (continue to?) run their hired business through Uber, and eventually Uber will gain the ability to pick up street hails. Uber will buy Taxi.com and ditch the Uber brand. The new Taxi.com will market itself as a dispatching service for independent taxi companies, but take a large percentage off of the top of each cab ride - and reduce that percentage in markets where independents have managed to survive. They'll also unify through systemwide discounts/customer loyalty programs. In the end, the only difference in the taxi market will be a new middleman, higher + less direct pricing, and lower quality (after you have to take what Uber gives you.)
- araes 12y ago
  Unfortunately, large companies can also much more easily engage in rent-seeking behaviour (http://en.wikipedia.org/wiki/Rent-seeking http://en.wikipedia.org/wiki/Rent-seeking) which small competitors can't engage in effectively unless they organize as a group (effectively a small business union) Even worse, rent-seeking is often a better use of money than actually innovating in the market you supposedly compete in. If I can disadvantage all of my competitors with horrific regulations that severely penalize small size competitors, then I need to do nothing and rake in the cash. So, its a tired refrain, but one of the other main issues is that our regulatory and governance bodies are just not agile enough to deal with companies that are, and actively manipulate them. In some cases, that can be a benefit, as loopholes or slow response may allow companies to get established before regulation catches up and reams them, but if the big boys (JP, GE, Exxon, Apple, Walmart, ect..) are on the ball, they can effectively kill whole markets as they appear. Just regulate them away.
  - cratermoon 12y ago
    Regulatory capture is the word of the day.
  - rayiner 12y ago
    I've said this in other threads, but I think this angle is overstated by people who underestimate the purely business advantages that come with scale. Look at the tech industry, which historically hasn't had much involvement with regulation and thus little opportunity for regulatory capture. Is Apple using regulations to keep Jolla from succeeding? No. They use their scale to amortize their OS development work over tens of millions of units. They use their scale to invest in manufacturing processes and equipment that allows them to release complex designs that competitors can't match at the same price point. They use their scale to do in house CPU development, etc. People want to believe that the free market means tons of little companies duking it out. They blame consolidation on the government and rent seeking and regulatory capture. But the fact is that there are massive business advantages to being big, and the natural state of the market is in the direction of consolidation (e.g. the trusts back in the day of Carnegie).
    - 12y ago
- AnthonyMouse 12y ago
  > Technology enables consolidation. I don't think that's quite right. Technology enables scale. That doesn't inherently mean consolidation. For example, you can imagine Uber as a decentralized or federated P2P free software app. It's essentially a market for rides. There is no inherent reason it has to work like Facebook rather than TCP/IP or DNS. Someone like FSF or Mozilla could build the technology and then the the only people making money would be all the small timers offering rides and getting good deals on rides. The obvious question is why that hasn't happened. And it's because there are other forces pushing consolidation. Markets don't inherently need middlemen but you end up with them when some serious problem(s) exist which require a consolidated entity to solve them. Somebody has to fight the taxi commissions. Somebody has to process the payments. It's the same reason Paypal exists. The technology for processing payments is hardly rocket science. Paypal shouldn't be a company, it should be a standard protocol supported by all financial institutions. You authenticate to your bank or credit provider, you provide an amount and a routing number and that much money is transferred from your account to the target account. A protocol something like that must already exist as it must be what Paypal uses to communicate with the banks. The problem is it isn't directly available to the actual account holders. So I can't write a free app or library that will allow you to connect directly to your bank and request bank transfers regardless of which bank you use. So when Joe Blow wants to pay for a ride or some knickknack on eBay, he can't just tell his bank to send the money, he first has to sign up for Uber or PayPal and tell them to tell the bank. Solely because they've filled out all the appropriate forms with the Department of Redundancy Department in order to gain access to your money that you don't have yourself. That's where the consolidation comes from.
  - mindcrime 12y ago
    Technology enables scale. Technology may also reduce the need for scale. If you believe that Coase[1] was right about the "nature of the firm" vis-a-vis transaction costs[2] then it would follow that technology that can reduce transaction costs reduces the advantage of being big. And since there are innate downsides to size (people usually ignore this point), transaction-cost-reducing technology should generally work against bigger companies. Is that happening? I don't know, I haven't really studied the issue, and I don't have enough data to say. But even if the argument leveled in this article is right (and I'm not sure it is), I'd be skeptical of the idea that it's technology which is driving a move towards bigger / older businesses. [1]: http://en.wikipedia.org/wiki/Theory_of_the_firm http://en.wikipedia.org/wiki/Theory_of_the_firm [2]: http://en.wikipedia.org/wiki/Transaction_cost http://en.wikipedia.org/wiki/Transaction_cost
- mindcrime 12y ago
  A new mom & pop coffee shop might easily out-compete the old mom & pop coffee shop across the street, but they can't offer the scale and uniformity of a Starbucks And if they try, they had a bad strategy in the first place, and they deserve to fail. You don't compete against Starbucks on the basis of scale and uniformity. If you do it at all, you do it by offering a higher quality product (not an unreasonable proposition), or by offering greater customer intimacy (also not unreasonable) or maybe by achieving better operational efficiency and competing on price (this one seems like a stretch). But the point is, no one company can be "everything to everybody". Starbucks is vulnerable to competition from companies that follow a different value discipline, and that's why there are still local coffee shops, even where there are Starbucks stores. When big corporations die, it's either because of their own mistakes, or some seismic market or technological shift (e.g. Kodak). That's probably mostly true, but the big corporations don't have to die completely to allow smaller competitors to co-exist.
  - d23 12y ago
    You used coffee shops, which is a bit of a strawman. How might a small competitor even begin to compete with the iPhone?
    - mindcrime 12y ago
      I wasn't the one who started talking about coffee shops, FWIW. As for the iPhone... I don't know - I haven't thought about it, and consumer devices are of little interest to me, so I'm probably not the guy to come up with a great idea for competing with the iPhone.
- laughfactory 12y ago
  I only disagree with you statement that big companies are more efficient. Starbucks, maybe, but many other large companies are so horribly inefficient that it amazes me they not only survive, but thrive. Case in point, the large bank where I work: super slim margins, really inefficient operations, the whole nine yards. In my experience large corporations are mostly this way: lumbering giants.
vasilipupkin 12y ago
Another issue is that as IT has become more prevalent in corporations, there are just more jobs out there in existing companies for STEM grads - so they feel less pressure to start new companies. But, I would honestly not take this data too seriously. The latest startup tech boom is too young to judge. this data is probably skewed by the tech collapse of 2000-2001.
rubiquity 12y ago
Could other possible reasons be: 1) The companies innovating become large themselves and are now indistinguishable from the incumbents? 2) Silicon Valley is in a venture capital frenzy. VCs make money by exits. Innovative companies keep getting bought by the incumbents.
- dcosson 12y ago
  Not to mention that counting the number of companies says little about their cumulative impact.
- api 12y ago
  The author is looking at the economy broadly, not just tech and not just Silicon Valley.
- a8da6b0c91d 12y ago
  It's hard to overstate how important monetary policy is in this state of affairs. CapEx has been plummeting for years because it makes more sense to lever up with artificially cheap debt and gamble with equity. We see less upstarts and less major capital investment by businesses because that's way riskier than the guaranteed returns that can be got through other common schemes predicated on cheap money. http://davidstockmanscontracorner.com/the-financialization-of-american-business-how-cheap-debt-fuels-the-bubble/ http://davidstockmanscontracorner.com/the-financialization-o...
  - zanny 12y ago
    Ding, we have a winner. The entire state of the economy is predicated on the effects tax policy has on where money is safest, and where money is least taxed, and of course the money goes where the optimal returns for the lowest risk are. And those are not in entrepreneurship.
cushychicken 12y ago
Though I find his point intriguing about corporate America entrenching itself, the graphs he has chosen to represent it are a bit misrepresented - most notably, the graph about startup failure rate. I disagree that the rate of failure in startups has risen significantly in the last 20 years - he cherry picked his data point from 1991 to 2011. The first fifteen years of that interval remain almost entirely flat. The spike in the last three are easily explainable as part of the housing bubble bursting that sent a bunch of businesses in the US to the deadpool. Conversely, the declines in new businesses in the early 80s and late 00s can be easily attributed to spikes in the price of oil and the housing bubble bursting. The rate seems pretty solid at about 10 percent before that. I find the evidence he presents inconclusive at best. If anything, I find it encouraging - no huge sea changes in the ability to start a business in the US over the last 30 years, except for macroeconomic factors.
- wldcordeiro 12y ago
  Agreed, on that particular chart at the 2010 point there was actually an increase going forward after the 2007-2008 drop.
- deleted 12y ago
  [deleted]
7Figures2Commas 12y ago
In many markets, there are great opportunities to nibble around the edges of the larger companies. The crumbs of many of these companies offer entrepreneurs the opportunity to build six and seven figure annual businesses. The way to win in markets that aren't likely to be "disrupted" is to go for the crumbs, not the cake. It's a shame so many entrepreneurs have been deluded by the appeal of "disruption." Here's a Y Combinator example: Casetext says it is "disrupting" the legal research market dominated by Westlaw and LexisNexis[1]. Anybody who has any experience in this market knows how absurd this is. Bloomberg has invested approximately $1 billion trying to make a dent in this market, with limited success[2]. You simply cannot disrupt the incumbents because they have too many advantages. That doesn't mean there's no opportunity in the legal research market, however. There are quite a few focused/niche legal research services that are doing well. I know one that counts close to 90% of the Amlaw 100 as subscribers. This service will never be a billion dollar business, or even a $100 million business, but back-of-the-envelope math says it's a business most founders would feel blessed to have started. [1] https://news.ycombinator.com/item?id=8011009 https://news.ycombinator.com/item?id=8011009 [2] http://www.adweek.com/news/press/fortune-reports-bloombergs-identity-crisis-154319 http://www.adweek.com/news/press/fortune-reports-bloombergs-...
dicroce 12y ago
democracy->oligarchy->dictatorship->collapse->democracy
- michaelochurch 12y ago
  Actually, I tend to think that the Iron Law of Oligarchy is correct. Dictatorships also converge to oligarchy. The autocrat still has to rely on his handlers and lieutenants for information. They become oligarchs. Oligarchy gives way to aristocracy, which is more effete and less dangerous. Oligarchs want to be powerful. Aristocrats want to be other things (e.g. dignified, respectable, prestigious) and tend to let go of some of their power. The problem is that some aristocrats see the power vacuum and rush in, and then you get a new oligarchy, but one based solely on entitlement. That tends to lead to collapse, from which all sorts of systems can emerge.
gregoryw 12y ago
Private sector wages are quite high in places like San Francisco. Large successful corporations are great at incentivizing would-be startup owners into staying. Large companies are making money, the employees are creating value, and they're realizing some of the value as personal wealth. People launch businesses when they have no better opportunity in front of them. In a rising economy with a record stock market, even the most capable people are finding significant upside within the companies they're employed by.
brothe2000 12y ago
I think the author of the article went looking for stats to support a title. Corporate America has been disrupted however I think this article was looking for financial failure versus adapting to the market pressures. The corporations below have faced massive disruption: Kodak, HP, GM, Ford, JC Penney, Sears, McDonalds, Radio Shack, Circuit City, Best Buy, Borders, Barnes&Noble, IBM, Microsoft, Xerox, and Target have all been disrupted. But most of them have adapted as the market changed because they had the resources to do so. A small company has fewer resources so when adversity hits (housing crash in 2008) or the market shifts (Digital music versus record stores), those business are less likely to be able to shift. Regarding the comments in the article on Entrepreneurs: I think the article is using too much of the 2000's data to make a correlation to today. 2001 - 2010 was the dot com bubble, 9/11, unemployment at 9%, and the housing / financial crisis. Banks weren't lending money and people had little capital to borrow. Compared to today: Banks are lending again, unemployment is 6.2%, people are spending and earning more, and everywhere you read about startups and entrepreneurs. One last thing: I find it humorous when articles say that government regulations, licensure, or taxes prevent innovation and entrepreneurial activity. I have never heard somebody say "I'd totally build X but the tax incentives just aren't high enough".
- aestra 12y ago
  >Kodak, HP, GM, Ford, JC Penney, Sears, McDonalds, Radio Shack, Circuit City, Best Buy, Borders, Barnes&Noble, IBM, Microsoft, Xerox, and Target have all been disrupted. The irony there is a lot of them started out as disruptors themselves!
- GeneralMayhem 12y ago
  >I have never heard somebody say "I'd totally build X but the tax incentives just aren't high enough". I read it more as "I'd totally build X but I have no idea how to do it legally or even how to learn what the legal requirements are." Much easier to work for a big company that can afford full-time lawyers.
  - brothe2000 12y ago
    I think some times startups say "I know this is the law but it's outdated and let's see what happens..." Sometimes it's bad: Aereo Sometimes it's controversial: Uber / Lyft But for the most part I think people act and then find out after the fact they did something wrong or not in alignment with expectations. For example, is Soylent worried about somebody dying? Probably but that didn't stop them from doing what they are doing.
api 12y ago
I keep saying to people in valleybubble.io that the rest of America is in something like a depression. It might not meet the strict economic criteria of a depression, but the general sense is that there is no opportunity and that the future is only for the 1%. Wages are going down (or nominally flat and losing ground to inflation) and everything else is going up (or at least keeping up with inflation). This is particularly true if you're not in the top ten to twelve (mostly coastal) major cities: San Francisco, New York, Seattle, Boston, "San Angeles," etc. The gap between rich and poor cities has noticeably worsened in the past 10-20 years. In the rich ones, the poor are being priced out. In the poor ones, there are no jobs and no routes to advancement. The long term trend is toward something resembling The Hunger Games, with the alpha coastal cities as "the capital" and the rest as "the precincts." It looks not terribly unlike Japan post-bubble, but perhaps with streaks of Gilded Age and the 1970s cultural malaise. It's not pretty.
drcode 12y ago
I agree with everything in OP, and this admittedly makes me sound like a dreamer, but I think there's a good chance that computer-aided radical decentralization is going to have a major effect on these numbers in the next few years. The possibilities of blockchain technology (and other technology inspired by it) has barely even begun to percolate through society, and in theory it allows free agents to fill roles previously only viable inside of corporations. http://www.reddit.com/r/Rad_Decentralization/ http://www.reddit.com/r/Rad_Decentralization/
- walterbell 12y ago
  What about the lack of privacy in Bitcoin? Couldn't that be used to regulate the decentralized agents? http://www.pds.ewi.tudelft.nl/~victor/bitcoin.html http://www.pds.ewi.tudelft.nl/~victor/bitcoin.html
  - drcode 12y ago
    It's easily to be arbitrarily anonymous with something like bitcoin. The only way the government could maintain attributability for bitcoin accounts would be to put in place extremely aggressive enforcement policies that (hopefully) would not be viable.
    - walterbell 12y ago
      Any references on how to accomplish this? The link above says ".. for perfect anonymity, both sender and receiver have to split every complex transaction among separate pairs of throw-away identities. But at this point, transactions stop being technically atomic, in addition to the fact that the system becomes quite complicated and heavyweight." https://bitcoin.org/en/you-need-to-know https://bitcoin.org/en/you-need-to-know says "Bitcoin is not anonymous .. Some effort is required to protect your privacy with Bitcoin. All Bitcoin transactions are stored publicly and permanently on the network, which means anyone can see the balance and transactions of any Bitcoin address. However, the identity of the user behind an address remains unknown until information is revealed during a purchase or in other circumstances. This is one reason why Bitcoin addresses should only be used once."
michaelochurch 12y ago
First of all, it's pretty clear that the Valley isn't "disrupting" the establishment. It is the establishment. The elephant in the room: the death of the middle class. Thirty years ago, unions were strong and average people had savings. Venture capitalists were wealthier than average, but not of a superior class... and they still hung out with people who wrote code for a living. Class distances weren't nonexistent, but they weren't nearly as sheer as they are today. And venture capital wasn't a requirement because bootstrapping was really possible, because average people actually had money. People complain about how the Valley is cranking out apps for spoiled 20-year-olds instead of regular people, and missing the much bigger point, which is that "regular people" are cash-strapped, time-poor, overworked and generally disenfranchised altogether. The people building apps for spoiled 20-year-olds are staking out the new, post-large-middle-class world. Now, to bankroll a business you either need elite connections (usually to people spending others' money) or outlandish luck, you have to have people in your pocket who'll ensure coverage, and you'll probably end up taking a back seat in your company as soon as you hire a "business co-founder" who can deliver Sequoia and A16Z. No one has a good idea what to build, and products and technology aren't really the point (the point is getting bought; "startups" are a long audition process for would-be corporate executives looking to jump the queue) but one sector that isn't being targeted is the (disintegrating) middle class. Corporate America, meanwhile, is stronger than ever. The wealth and connections are even more concentrated, giving power to the few at the expense of the many. And these Valley startups are the driving force behind all of this.
- maxsilver 12y ago
  Agree entirely. This is a perfect write up of the situation at hand. > but one sector that isn't being targeted is the (disintegrating) middle class. So, what (if anything) can we do to fix this? Is there anything a regular person can do or work on to help the (disintegrating) middle class?
  - Consultant32452 12y ago
    I would suggest joining unions and encouraging others to join them. With all the nonsense coming out of Google, Microsoft and others regarding wage warfare against their own employees I'm shocked that developers haven't unionized.
sadface 12y ago
I have another suggestion for the decline in startup rates: health care and college expenses. The historically "prime" years for entrepreneurship are in one's late 30's to early 50's, years when one typically has a family in need of healthcare, college tuition, and hopefully retirement at some point down the line. In the 70's and 80's someone could leave the security of their big company, get relatively affordable private insurance for them and their family, and sleep moderately well knowing that even if their new venture fails their children will at least be able make it through a state school working part time. Now, they'll have to pay through the nose for healthcare and we all know how much schools cost these days. Given the increased failure rates of new ventures these days it's not so hard to see why more mid-career individuals are remaining in corporate jobs instead of venturing out on their own: it's getting too expensive to roll those dice.
- madengr 12y ago
  You nailed it. I also add that the government (probably varies allot by state) makes it very difficult to hire employees. My wife and I hired a nanny a few years ago, doing everything by the book regarding taxes and insurance. Still got fined twice for some infantile amount owed on something, even after three calls to the state office resulted in three separate amounts of what we owed. I'll NEVER take on an employee again. The game is rigged to favor those who can afford the lawyers and accountants.
  - gohrt 12y ago
    1. Was the fine large enough to matter? 2. You can hire an "nanny tax" accountant for ~$500 a year (maybe was more expensive a few years ago)
    - madengr 12y ago
      1) No, it was a fine for an amount owed under $100, which we paid, but then received a bill for another fine, since it now said we owed $150. Three calls to separate state offices resulted in three amounts owed. We just picked the highest of the 3 and paid the damn thing. This is in KS which is supposed to be "business friendly". I should have just done as the politicians and hired an illegal alien under-the-table. 2) Yes, but it's the principle. I have to hire an accountant (zero added value for me) just to hire someone who actually does provide value to me. It shouldn't be this complicated. It was easier setting up an LLC, and if we could do that, we should not need an accountant for a nanny; guess not.
pinkyand 12y ago
I wonder: were past disruptive efforts more sucsessfull in unseating incumbents ? And is Clayton Christensen theory responsible for bigger companies' better defense against disruption ?
- HeyLaughingBoy 12y ago
  This is something that seems to be ignored in this discussion. There's a widespread belief that large companies are stupid and unaware of what's going on around them. However, the boom in easily available knowledge benefits everyone, including large corporations. They may be "disrupted" but they are also much more aware that it's happening and can take steps to adapt to it and thrive in a new environment.
spodek 12y ago
As a Professor of entrepreneurship at NYU's engineering school (that VC Fred Wilson called a jewel -- http://avc.com/2014/03/the-value-of-an-engineering-degree http://avc.com/2014/03/the-value-of-an-engineering-degree), I can summarize the problem in one phrase many of my students said when describing their goals after graduation: "... but I have to get a job at a big company to sponsor my visa." They're brilliant, motivated, and capable, but almost none are citizens. To start new companies they have to leave the U.S. To stay they have to work for a big company even though more than half are continuing their entrepreneurial class projects after the course ended. There are options to jump through difficult hoops, but those options are much harder for most. So we motivate potential entrepreneurs to start elsewhere or give up their plans. What if instead we motivated the world to start companies here instead of elsewhere? (Incidentally, we're organizing an event in October for non-U.S.-citizens who found ways to start companies and stay here to help inspire others to find ways to do it. If you're interested, especially if you know non-citizens who found ways to stay and live near NYC, please contact me -- http://joshuaspodek.com/contactconnect. http://joshuaspodek.com/contactconnect.)
- deleted 12y ago
  [deleted]
- anigbrowl 12y ago
  A corollary to that is that even if you work out the legal obstacles (it's possible to get a tax ID and even start a company without having legal status), it's difficult to accumulate the seed capital if you can't work a regular job. That'a s bit less of an issue for people in tech startups - if you already have a laptop and internet service, then you may not need any additional physical capital - but it can be a huge barrier in other lines of business where you may need to invest in a fair amount of equipment in order to be basically competitive. Say someone wants to start a photography business, for example, which is pretty lightweight sort of business - you're still looking at maybe $10k of gear and a year of studio/office rental expenses, potentially much more. You don't have to go that route to succeed as a photographer, but absent that starting capital it's going to take considerably longer to get established. And while that's not a huge amount of money, many immigrants don't have access to credit or jobs that pay enough to accumulate savings.
schnable 12y ago
Much of what we are seeing is the effect of our insane visa and immigration policies. The traditional entrepreneurial spirit of the United States was driven by the culture of immigrants. Over 40% of the companies on the Fortune 500 were founded by immigrants or the children of immigrants. These were once disruptive startups. Now we make it very difficult for talented and intelligent people to become permanent residents. So instead they stay home, or maybe go to Canada or Australia.
- _delirium 12y ago
  Has the number of people becoming U.S. permanent residents or naturalized citizens actually declined, relative to the times those Fortune 500 companies were founded? As far as I can tell, it hasn't: somewhere around 1 million new permanent residencies are granted per year in the 2010s, versus ~250,000 in 1960, which is actually about twice as many relative to population (~0.3% of population annually now, up from ~0.15% in 1960). Sure, there are many more people wanting to become PRs than are granted, but immigration has been gradually expanding since the low of the 1930s/40s, not contracting. It's true that immigration was freer prior to the 1930s, but today is better than any other time post-WW2, in terms of the % of the population that is foreign-born, the # of naturalized citizens, the # of permanent residencies granted, etc.
  - yvsong 12y ago
    Most green cards today are family-based instead of employment or skill based. Family is a golden word in America, according to the Godfather: "But don't ever take sides with anyone against the Family again." In addition, there are many diversity (lottery), refugee, and asylum green cards. It's funny while America is hated, and some other countries are touted to have better systems and will soon take over America's leadership, tons of people are voting for America with their feet, and crying for green cards.
- bluedino 12y ago
  We have 7-20 million illegal immigrants in the USA out of 313 million total residents. How difficult can it really be to stay?
AndrewKemendo 12y ago
So where is there a better environment for entrepreneurship? I don't mean theoretically, I mean in practice. Is there a country that has better infrastructure, capital markets, regulation and market size? I am genuinely curious.
- michaelq 12y ago
  Based on the criteria you mention (infrastructure, capital markets, regulation and market size), there most certainly isn't one. The other large countries have more onerous regulations and worse infrastructure than the US does. But it's clearly not enough to say "the US isn't as bad as everywhere else" if everywhere else is merely drifting toward consolidation more slowly.
debt 12y ago
The compensation packages that tech companies are offering are outrageous. Coupled with the fact that money itself generates better returns than most startups. Earning 10% a year over 10 years in some mutual fund is way better than investing in some startup that'll be around for likely less than two years. The housing market in the Bay Area is exploding. The salaries are going to have to keep up somewhat with that explosion. Why would I run a startup making 50k in Chicago, when I can make more than triple that(with RSUs, options, ESPP, healthcare, etc.) in the Bay Area? Also, keep in mind the ground beneath us is shifting constantly. Some web app written in Backbone yesterday may be slow as farts today. Objective-C, what's that? CSS? Use SASS. Chef? Use Docker. I mean use AWS. I mean use Digital Ocean. I know it seems meaningless what technologies you use, but these are the margins which people win by; the ability to be fast and scale quickly. Those are just two aspects of probably a million other really important aspects in running a successful startup. Again, though, you have to work normal hours(so as not burnout) while paying yourself enough to survive(forget the Bay Area). It's just not worth it to run a startup given the economics. Unless you can secure a shit ton of upfront investment. Which is unlikely unless the investor feels your startup idea could at least outperform some other investment vehicle like a mutual fund.
itisbiz 12y ago
"Revitalization" might be better word than "disruption" to explain what is required of corporate sector. But corporate sector is adopting "disruptive" technologies and methods such as cloud, analytics, ecommerce. The problem is it is incremental and interstitial rather than comprehensive.
ryanmarsh 12y ago
For the purposes of this discussion we should dispense with the word "startups" and replace it with "new businesses". Since 1970 the rate of new businesses has been falling. Gee, can anyone else think of reasons why that might be besides immigration and housing rates in the bay area? What a bunch of navel gazing. Perhaps there is a causal connection with population age? What about other factors? What if we zoom out a bit and look at general workplace productivity factors and the impact of technology? Yes, that old crusty stuff they are currently using which you don't consider technology. It's actually a lot better than how things were done before, and before that, and before that too. And what about the rising number of old companies? Look at different industries such as air travel, raw materials, and manufacturing. What I see is Standard Oil all over again, consolidation, incremental optimizations, with a little anti-competitive behavior thrown in to boot. That's sometimes the problem with us programmers, especially the more naive amongst us. We often believe that File > New is the answer to the world's problems when incremental optimization often is more pragmatic (and as the market shows us, more effective). It isn't sexy but it "works". I don't know much about Home Depot but I'm going to guess that they got as big as they did (mostly) by introducing optimizations into the marketplace for home improvement products. They are not a monopoly (such as taxi services) that was created by and protected through legislation and can dissolve rather quickly (like it did in Houston this week) with a change in public support. The tech "startup" community should stop looking at companies like Wal-Mart as evil and start to respect and marvel at the massive amounts of muda they have been able to eliminate from product supply chains. Just because they don't use Node.js doesn't make them disruptable (yes, I'm aware Wal-Mart actually does use Node). </rant>
- wuliwong 12y ago
  I agree with your overall sentiment. BUT, regarding Wal-mart, Home Depot and other large corporations; they certainly have benefited by lobbying for a better economic playing field for very large corporations. They also have attained their success and market share through innovations, optimizations and seized opportunities. I see it as a lot more complex than Wal-mart is "evil" or not. My position is that it just isn't that simple.
- DavidAdams 12y ago
PaulHoule 12y ago
I think the promulgation of the idea of "disruption" is itself an anti-disruptive force. The Microsofts of this world have seen the Kodaks and Xeroxes go down, so we see them doing bold things. For instance, Microsoft saw tablets as a threat to the PC, and they didn't let the fact that their customers didn't see it this way from releasing Windows 8.
wuliwong 12y ago
Does anyone see all the data cited in the article as only kinda tangentially related to what seems to be the main idea of the post? Isn't it possible that "corporate america" is being disrupted AND their are less new companies being formed? It seems simple enough to prove, if only 5 new companies started this year and all 5 grew to be as large as Google, that would be some serious disruption. I am not arguing that their thesis is wrong, it just seems their supporting data falls short of proving the case. I think a more telling dataset would be a similar type of time analysis but looking at the top 500 companies by market cap. How many are new? And that might not even really be getting at the author's real point. Because, he's talking about upsetting existing industries. For instance, sure Apple, Google and MS are pretty new. But did they disrupt an industry or just make it through as the winners of a newly minted "tech" industry? I'm actually asking because this question and thesis is genuinely interesting to me.
gaius 12y ago
"Disruption" really means using technology to find loopholes in the law e.g. AirBnB "disrupting" hotels by providing services for people operating unlicensed hotels. Do how do you disrupt a bank? Insider trading? Fraud? Stealing deposits?

200 points by japaget 12y ago

Another simple explanation for the decline might be economies of scale or economies of scope (or both) . Thirty years ago they might have had a smaller effect on small businesses (like coffee shops and retailers), whereas nowadays complex logistics (economies of scale, ie. walmart) or versatile production facilities (economies of scope, ie. starbucks) have a bigger influence on profits.

rayiner 12y ago

I think there is a bit of cognitive dissonance in the tech community about "disruption" versus "big companies." Technology, in general, makes it easier to scale companies to large sizes, and "disruption" often involves using technology to enter an existing industry that is dominated by small, inefficient companies. A great example is Uber. Uber is making the taxi market a lot more efficient, but it's also well on the path to replacing a bunch of little local taxi companies with a big national one. That's the power of technology: it pushes out the point on the curve where diseconomies of scale cancel out economies of scale. Technology enables consolidation. Other good examples are the dry cleaning and food delivery startups. It's also not surprising that once an industry has been "disrupted" it takes a lot to push out the incumbent. Small businesses are generally inefficient and prone to failure. Large corporations are efficient and diversified in comparison. A new mom & pop coffee shop might easily out-compete the old mom & pop coffee shop across the street, but they can't offer the scale and uniformity of a Starbucks. When big corporations die, it's either because of their own mistakes, or some seismic market or technological shift (e.g. Kodak).

snowwrestler 12y ago
I think big music labels are another example of corporations that have been disrupted less than folks here on HN might think. Yes, iTunes changed the music industry, but who got killed? CD retailers, primarily. The bulk of music sold through iTunes is still licensed from big labels. Spotify licenses music from the big labels. Ads, TV shows, and movies license music from big labels. Heck even the most popular videos on YouTube are almost all the official Vevo versions of big-label songs. Piracy is harming album sales, but because big labels have so much financial leverage over new artists, they have simply started requiring "360" deals for a lot of new contracts, which give them a cut of all revenue streams: not just albums, but also tour revenues, merchandise, media appearances, sync licences (ads and movies), even publishing in some cases.
- mason55 12y ago
  Reminds me of an article on /r/movies the other day about "XYZ didn't kill the movie industry, the movie industry killed itself". Well... no. The movie industry is far from dead and is doing quite well for itself. It even avoided the mistakes the music labels made when they gave Apple too much power (a mistake that they have since recovered from).
  - snowwrestler 12y ago
    Some labels/studios are being hurt by piracy, primarily the mid-size and smaller independents. They have less financial leverage over their artists, but more importantly, many of them choose to limit their relationships with artists to publishing and promotion, so they are more dependent on album sales for revenue. They also tend to more fan-friendly, so they generally choose not to fight against file sharing, etc. even though it hurts them. These are the "middle class" level folks in those industries--making a professional living, but not getting rich. That particular stratum is being eaten away by piracy. At the lower extremes of the industries, piracy is making it easier for new folks to get found and build an audience. But once they want to take the next step, they'll have a harder time staying out of the big company systems than folks 15 years ago. There are just fewer "mid-range" professional options available to them now.
    - anigbrowl 12y ago
      Exactly. The labels that have been worst hurt by the digital revolution were the least exploitative ones.
    - eruditely 12y ago
      These comments need to be hedges. With services like soundcloud and artists publishing their music and directly uploading new albums, a new method for payments that is not an over-extended method of sales and 'representation' based on antiquated physical formats will need to rise, and I welcome it.
pessimizer 12y ago
>Small businesses are generally inefficient and prone to failure. Also, small businesses have to make money now, or nearly now, before their angels run out. Large businesses can lose money for as long as it takes for the small businesses to fold, and will still attract investment that anticipates the future monopoly/monopsony pricing possible after all small firms close. Also, large companies can eat small competitors, or collude with each other (non-competes, patent truces) in ways that exclude the smaller actors. ----- Edit with a possible Uber future: Cab companies will start to (continue to?) run their hired business through Uber, and eventually Uber will gain the ability to pick up street hails. Uber will buy Taxi.com and ditch the Uber brand. The new Taxi.com will market itself as a dispatching service for independent taxi companies, but take a large percentage off of the top of each cab ride - and reduce that percentage in markets where independents have managed to survive. They'll also unify through systemwide discounts/customer loyalty programs. In the end, the only difference in the taxi market will be a new middleman, higher + less direct pricing, and lower quality (after you have to take what Uber gives you.)
araes 12y ago
Unfortunately, large companies can also much more easily engage in rent-seeking behaviour (http://en.wikipedia.org/wiki/Rent-seeking http://en.wikipedia.org/wiki/Rent-seeking) which small competitors can't engage in effectively unless they organize as a group (effectively a small business union) Even worse, rent-seeking is often a better use of money than actually innovating in the market you supposedly compete in. If I can disadvantage all of my competitors with horrific regulations that severely penalize small size competitors, then I need to do nothing and rake in the cash. So, its a tired refrain, but one of the other main issues is that our regulatory and governance bodies are just not agile enough to deal with companies that are, and actively manipulate them. In some cases, that can be a benefit, as loopholes or slow response may allow companies to get established before regulation catches up and reams them, but if the big boys (JP, GE, Exxon, Apple, Walmart, ect..) are on the ball, they can effectively kill whole markets as they appear. Just regulate them away.
- cratermoon 12y ago
  Regulatory capture is the word of the day.
- rayiner 12y ago
  I've said this in other threads, but I think this angle is overstated by people who underestimate the purely business advantages that come with scale. Look at the tech industry, which historically hasn't had much involvement with regulation and thus little opportunity for regulatory capture. Is Apple using regulations to keep Jolla from succeeding? No. They use their scale to amortize their OS development work over tens of millions of units. They use their scale to invest in manufacturing processes and equipment that allows them to release complex designs that competitors can't match at the same price point. They use their scale to do in house CPU development, etc. People want to believe that the free market means tons of little companies duking it out. They blame consolidation on the government and rent seeking and regulatory capture. But the fact is that there are massive business advantages to being big, and the natural state of the market is in the direction of consolidation (e.g. the trusts back in the day of Carnegie).
  - 12y ago
AnthonyMouse 12y ago
> Technology enables consolidation. I don't think that's quite right. Technology enables scale. That doesn't inherently mean consolidation. For example, you can imagine Uber as a decentralized or federated P2P free software app. It's essentially a market for rides. There is no inherent reason it has to work like Facebook rather than TCP/IP or DNS. Someone like FSF or Mozilla could build the technology and then the the only people making money would be all the small timers offering rides and getting good deals on rides. The obvious question is why that hasn't happened. And it's because there are other forces pushing consolidation. Markets don't inherently need middlemen but you end up with them when some serious problem(s) exist which require a consolidated entity to solve them. Somebody has to fight the taxi commissions. Somebody has to process the payments. It's the same reason Paypal exists. The technology for processing payments is hardly rocket science. Paypal shouldn't be a company, it should be a standard protocol supported by all financial institutions. You authenticate to your bank or credit provider, you provide an amount and a routing number and that much money is transferred from your account to the target account. A protocol something like that must already exist as it must be what Paypal uses to communicate with the banks. The problem is it isn't directly available to the actual account holders. So I can't write a free app or library that will allow you to connect directly to your bank and request bank transfers regardless of which bank you use. So when Joe Blow wants to pay for a ride or some knickknack on eBay, he can't just tell his bank to send the money, he first has to sign up for Uber or PayPal and tell them to tell the bank. Solely because they've filled out all the appropriate forms with the Department of Redundancy Department in order to gain access to your money that you don't have yourself. That's where the consolidation comes from.
- mindcrime 12y ago
  Technology enables scale. Technology may also reduce the need for scale. If you believe that Coase[1] was right about the "nature of the firm" vis-a-vis transaction costs[2] then it would follow that technology that can reduce transaction costs reduces the advantage of being big. And since there are innate downsides to size (people usually ignore this point), transaction-cost-reducing technology should generally work against bigger companies. Is that happening? I don't know, I haven't really studied the issue, and I don't have enough data to say. But even if the argument leveled in this article is right (and I'm not sure it is), I'd be skeptical of the idea that it's technology which is driving a move towards bigger / older businesses. [1]: http://en.wikipedia.org/wiki/Theory_of_the_firm http://en.wikipedia.org/wiki/Theory_of_the_firm [2]: http://en.wikipedia.org/wiki/Transaction_cost http://en.wikipedia.org/wiki/Transaction_cost
mindcrime 12y ago
A new mom & pop coffee shop might easily out-compete the old mom & pop coffee shop across the street, but they can't offer the scale and uniformity of a Starbucks And if they try, they had a bad strategy in the first place, and they deserve to fail. You don't compete against Starbucks on the basis of scale and uniformity. If you do it at all, you do it by offering a higher quality product (not an unreasonable proposition), or by offering greater customer intimacy (also not unreasonable) or maybe by achieving better operational efficiency and competing on price (this one seems like a stretch). But the point is, no one company can be "everything to everybody". Starbucks is vulnerable to competition from companies that follow a different value discipline, and that's why there are still local coffee shops, even where there are Starbucks stores. When big corporations die, it's either because of their own mistakes, or some seismic market or technological shift (e.g. Kodak). That's probably mostly true, but the big corporations don't have to die completely to allow smaller competitors to co-exist.
- d23 12y ago
  You used coffee shops, which is a bit of a strawman. How might a small competitor even begin to compete with the iPhone?
  - mindcrime 12y ago
    I wasn't the one who started talking about coffee shops, FWIW. As for the iPhone... I don't know - I haven't thought about it, and consumer devices are of little interest to me, so I'm probably not the guy to come up with a great idea for competing with the iPhone.
laughfactory 12y ago
I only disagree with you statement that big companies are more efficient. Starbucks, maybe, but many other large companies are so horribly inefficient that it amazes me they not only survive, but thrive. Case in point, the large bank where I work: super slim margins, really inefficient operations, the whole nine yards. In my experience large corporations are mostly this way: lumbering giants.

vasilipupkin 12y ago

Another issue is that as IT has become more prevalent in corporations, there are just more jobs out there in existing companies for STEM grads - so they feel less pressure to start new companies. But, I would honestly not take this data too seriously. The latest startup tech boom is too young to judge. this data is probably skewed by the tech collapse of 2000-2001.

rubiquity 12y ago

Could other possible reasons be: 1) The companies innovating become large themselves and are now indistinguishable from the incumbents? 2) Silicon Valley is in a venture capital frenzy. VCs make money by exits. Innovative companies keep getting bought by the incumbents.

dcosson 12y ago
Not to mention that counting the number of companies says little about their cumulative impact.
api 12y ago
The author is looking at the economy broadly, not just tech and not just Silicon Valley.
a8da6b0c91d 12y ago
It's hard to overstate how important monetary policy is in this state of affairs. CapEx has been plummeting for years because it makes more sense to lever up with artificially cheap debt and gamble with equity. We see less upstarts and less major capital investment by businesses because that's way riskier than the guaranteed returns that can be got through other common schemes predicated on cheap money. http://davidstockmanscontracorner.com/the-financialization-of-american-business-how-cheap-debt-fuels-the-bubble/ http://davidstockmanscontracorner.com/the-financialization-o...
- zanny 12y ago
  Ding, we have a winner. The entire state of the economy is predicated on the effects tax policy has on where money is safest, and where money is least taxed, and of course the money goes where the optimal returns for the lowest risk are. And those are not in entrepreneurship.

cushychicken 12y ago

Though I find his point intriguing about corporate America entrenching itself, the graphs he has chosen to represent it are a bit misrepresented - most notably, the graph about startup failure rate. I disagree that the rate of failure in startups has risen significantly in the last 20 years - he cherry picked his data point from 1991 to 2011. The first fifteen years of that interval remain almost entirely flat. The spike in the last three are easily explainable as part of the housing bubble bursting that sent a bunch of businesses in the US to the deadpool. Conversely, the declines in new businesses in the early 80s and late 00s can be easily attributed to spikes in the price of oil and the housing bubble bursting. The rate seems pretty solid at about 10 percent before that. I find the evidence he presents inconclusive at best. If anything, I find it encouraging - no huge sea changes in the ability to start a business in the US over the last 30 years, except for macroeconomic factors.

wldcordeiro 12y ago
Agreed, on that particular chart at the 2010 point there was actually an increase going forward after the 2007-2008 drop.
deleted 12y ago
[deleted]

7Figures2Commas 12y ago

In many markets, there are great opportunities to nibble around the edges of the larger companies. The crumbs of many of these companies offer entrepreneurs the opportunity to build six and seven figure annual businesses. The way to win in markets that aren't likely to be "disrupted" is to go for the crumbs, not the cake. It's a shame so many entrepreneurs have been deluded by the appeal of "disruption." Here's a Y Combinator example: Casetext says it is "disrupting" the legal research market dominated by Westlaw and LexisNexis[1]. Anybody who has any experience in this market knows how absurd this is. Bloomberg has invested approximately $1 billion trying to make a dent in this market, with limited success[2]. You simply cannot disrupt the incumbents because they have too many advantages. That doesn't mean there's no opportunity in the legal research market, however. There are quite a few focused/niche legal research services that are doing well. I know one that counts close to 90% of the Amlaw 100 as subscribers. This service will never be a billion dollar business, or even a $100 million business, but back-of-the-envelope math says it's a business most founders would feel blessed to have started. [1] https://news.ycombinator.com/item?id=8011009 https://news.ycombinator.com/item?id=8011009 [2] http://www.adweek.com/news/press/fortune-reports-bloombergs-identity-crisis-154319 http://www.adweek.com/news/press/fortune-reports-bloombergs-...

dicroce 12y ago

democracy->oligarchy->dictatorship->collapse->democracy

michaelochurch 12y ago
Actually, I tend to think that the Iron Law of Oligarchy is correct. Dictatorships also converge to oligarchy. The autocrat still has to rely on his handlers and lieutenants for information. They become oligarchs. Oligarchy gives way to aristocracy, which is more effete and less dangerous. Oligarchs want to be powerful. Aristocrats want to be other things (e.g. dignified, respectable, prestigious) and tend to let go of some of their power. The problem is that some aristocrats see the power vacuum and rush in, and then you get a new oligarchy, but one based solely on entitlement. That tends to lead to collapse, from which all sorts of systems can emerge.

gregoryw 12y ago

Private sector wages are quite high in places like San Francisco. Large successful corporations are great at incentivizing would-be startup owners into staying. Large companies are making money, the employees are creating value, and they're realizing some of the value as personal wealth. People launch businesses when they have no better opportunity in front of them. In a rising economy with a record stock market, even the most capable people are finding significant upside within the companies they're employed by.

brothe2000 12y ago

I think the author of the article went looking for stats to support a title. Corporate America has been disrupted however I think this article was looking for financial failure versus adapting to the market pressures. The corporations below have faced massive disruption: Kodak, HP, GM, Ford, JC Penney, Sears, McDonalds, Radio Shack, Circuit City, Best Buy, Borders, Barnes&Noble, IBM, Microsoft, Xerox, and Target have all been disrupted. But most of them have adapted as the market changed because they had the resources to do so. A small company has fewer resources so when adversity hits (housing crash in 2008) or the market shifts (Digital music versus record stores), those business are less likely to be able to shift. Regarding the comments in the article on Entrepreneurs: I think the article is using too much of the 2000's data to make a correlation to today. 2001 - 2010 was the dot com bubble, 9/11, unemployment at 9%, and the housing / financial crisis. Banks weren't lending money and people had little capital to borrow. Compared to today: Banks are lending again, unemployment is 6.2%, people are spending and earning more, and everywhere you read about startups and entrepreneurs. One last thing: I find it humorous when articles say that government regulations, licensure, or taxes prevent innovation and entrepreneurial activity. I have never heard somebody say "I'd totally build X but the tax incentives just aren't high enough".

aestra 12y ago
>Kodak, HP, GM, Ford, JC Penney, Sears, McDonalds, Radio Shack, Circuit City, Best Buy, Borders, Barnes&Noble, IBM, Microsoft, Xerox, and Target have all been disrupted. The irony there is a lot of them started out as disruptors themselves!
GeneralMayhem 12y ago
>I have never heard somebody say "I'd totally build X but the tax incentives just aren't high enough". I read it more as "I'd totally build X but I have no idea how to do it legally or even how to learn what the legal requirements are." Much easier to work for a big company that can afford full-time lawyers.
- brothe2000 12y ago
  I think some times startups say "I know this is the law but it's outdated and let's see what happens..." Sometimes it's bad: Aereo Sometimes it's controversial: Uber / Lyft But for the most part I think people act and then find out after the fact they did something wrong or not in alignment with expectations. For example, is Soylent worried about somebody dying? Probably but that didn't stop them from doing what they are doing.

api 12y ago

I keep saying to people in valleybubble.io that the rest of America is in something like a depression. It might not meet the strict economic criteria of a depression, but the general sense is that there is no opportunity and that the future is only for the 1%. Wages are going down (or nominally flat and losing ground to inflation) and everything else is going up (or at least keeping up with inflation). This is particularly true if you're not in the top ten to twelve (mostly coastal) major cities: San Francisco, New York, Seattle, Boston, "San Angeles," etc. The gap between rich and poor cities has noticeably worsened in the past 10-20 years. In the rich ones, the poor are being priced out. In the poor ones, there are no jobs and no routes to advancement. The long term trend is toward something resembling The Hunger Games, with the alpha coastal cities as "the capital" and the rest as "the precincts." It looks not terribly unlike Japan post-bubble, but perhaps with streaks of Gilded Age and the 1970s cultural malaise. It's not pretty.

drcode 12y ago

I agree with everything in OP, and this admittedly makes me sound like a dreamer, but I think there's a good chance that computer-aided radical decentralization is going to have a major effect on these numbers in the next few years. The possibilities of blockchain technology (and other technology inspired by it) has barely even begun to percolate through society, and in theory it allows free agents to fill roles previously only viable inside of corporations. http://www.reddit.com/r/Rad_Decentralization/ http://www.reddit.com/r/Rad_Decentralization/

walterbell 12y ago
What about the lack of privacy in Bitcoin? Couldn't that be used to regulate the decentralized agents? http://www.pds.ewi.tudelft.nl/~victor/bitcoin.html http://www.pds.ewi.tudelft.nl/~victor/bitcoin.html
- drcode 12y ago
  It's easily to be arbitrarily anonymous with something like bitcoin. The only way the government could maintain attributability for bitcoin accounts would be to put in place extremely aggressive enforcement policies that (hopefully) would not be viable.
  - walterbell 12y ago
    Any references on how to accomplish this? The link above says ".. for perfect anonymity, both sender and receiver have to split every complex transaction among separate pairs of throw-away identities. But at this point, transactions stop being technically atomic, in addition to the fact that the system becomes quite complicated and heavyweight." https://bitcoin.org/en/you-need-to-know https://bitcoin.org/en/you-need-to-know says "Bitcoin is not anonymous .. Some effort is required to protect your privacy with Bitcoin. All Bitcoin transactions are stored publicly and permanently on the network, which means anyone can see the balance and transactions of any Bitcoin address. However, the identity of the user behind an address remains unknown until information is revealed during a purchase or in other circumstances. This is one reason why Bitcoin addresses should only be used once."

michaelochurch 12y ago

First of all, it's pretty clear that the Valley isn't "disrupting" the establishment. It is the establishment. The elephant in the room: the death of the middle class. Thirty years ago, unions were strong and average people had savings. Venture capitalists were wealthier than average, but not of a superior class... and they still hung out with people who wrote code for a living. Class distances weren't nonexistent, but they weren't nearly as sheer as they are today. And venture capital wasn't a requirement because bootstrapping was really possible, because average people actually had money. People complain about how the Valley is cranking out apps for spoiled 20-year-olds instead of regular people, and missing the much bigger point, which is that "regular people" are cash-strapped, time-poor, overworked and generally disenfranchised altogether. The people building apps for spoiled 20-year-olds are staking out the new, post-large-middle-class world. Now, to bankroll a business you either need elite connections (usually to people spending others' money) or outlandish luck, you have to have people in your pocket who'll ensure coverage, and you'll probably end up taking a back seat in your company as soon as you hire a "business co-founder" who can deliver Sequoia and A16Z. No one has a good idea what to build, and products and technology aren't really the point (the point is getting bought; "startups" are a long audition process for would-be corporate executives looking to jump the queue) but one sector that isn't being targeted is the (disintegrating) middle class. Corporate America, meanwhile, is stronger than ever. The wealth and connections are even more concentrated, giving power to the few at the expense of the many. And these Valley startups are the driving force behind all of this.

maxsilver 12y ago
Agree entirely. This is a perfect write up of the situation at hand. > but one sector that isn't being targeted is the (disintegrating) middle class. So, what (if anything) can we do to fix this? Is there anything a regular person can do or work on to help the (disintegrating) middle class?
- Consultant32452 12y ago
  I would suggest joining unions and encouraging others to join them. With all the nonsense coming out of Google, Microsoft and others regarding wage warfare against their own employees I'm shocked that developers haven't unionized.

sadface 12y ago

I have another suggestion for the decline in startup rates: health care and college expenses. The historically "prime" years for entrepreneurship are in one's late 30's to early 50's, years when one typically has a family in need of healthcare, college tuition, and hopefully retirement at some point down the line. In the 70's and 80's someone could leave the security of their big company, get relatively affordable private insurance for them and their family, and sleep moderately well knowing that even if their new venture fails their children will at least be able make it through a state school working part time. Now, they'll have to pay through the nose for healthcare and we all know how much schools cost these days. Given the increased failure rates of new ventures these days it's not so hard to see why more mid-career individuals are remaining in corporate jobs instead of venturing out on their own: it's getting too expensive to roll those dice.

madengr 12y ago
You nailed it. I also add that the government (probably varies allot by state) makes it very difficult to hire employees. My wife and I hired a nanny a few years ago, doing everything by the book regarding taxes and insurance. Still got fined twice for some infantile amount owed on something, even after three calls to the state office resulted in three separate amounts of what we owed. I'll NEVER take on an employee again. The game is rigged to favor those who can afford the lawyers and accountants.
- gohrt 12y ago
  1. Was the fine large enough to matter? 2. You can hire an "nanny tax" accountant for ~$500 a year (maybe was more expensive a few years ago)
  - madengr 12y ago
    1) No, it was a fine for an amount owed under $100, which we paid, but then received a bill for another fine, since it now said we owed $150. Three calls to separate state offices resulted in three amounts owed. We just picked the highest of the 3 and paid the damn thing. This is in KS which is supposed to be "business friendly". I should have just done as the politicians and hired an illegal alien under-the-table. 2) Yes, but it's the principle. I have to hire an accountant (zero added value for me) just to hire someone who actually does provide value to me. It shouldn't be this complicated. It was easier setting up an LLC, and if we could do that, we should not need an accountant for a nanny; guess not.

pinkyand 12y ago

I wonder: were past disruptive efforts more sucsessfull in unseating incumbents ? And is Clayton Christensen theory responsible for bigger companies' better defense against disruption ?

HeyLaughingBoy 12y ago
This is something that seems to be ignored in this discussion. There's a widespread belief that large companies are stupid and unaware of what's going on around them. However, the boom in easily available knowledge benefits everyone, including large corporations. They may be "disrupted" but they are also much more aware that it's happening and can take steps to adapt to it and thrive in a new environment.

spodek 12y ago

As a Professor of entrepreneurship at NYU's engineering school (that VC Fred Wilson called a jewel -- http://avc.com/2014/03/the-value-of-an-engineering-degree http://avc.com/2014/03/the-value-of-an-engineering-degree), I can summarize the problem in one phrase many of my students said when describing their goals after graduation: "... but I have to get a job at a big company to sponsor my visa." They're brilliant, motivated, and capable, but almost none are citizens. To start new companies they have to leave the U.S. To stay they have to work for a big company even though more than half are continuing their entrepreneurial class projects after the course ended. There are options to jump through difficult hoops, but those options are much harder for most. So we motivate potential entrepreneurs to start elsewhere or give up their plans. What if instead we motivated the world to start companies here instead of elsewhere? (Incidentally, we're organizing an event in October for non-U.S.-citizens who found ways to start companies and stay here to help inspire others to find ways to do it. If you're interested, especially if you know non-citizens who found ways to stay and live near NYC, please contact me -- http://joshuaspodek.com/contactconnect. http://joshuaspodek.com/contactconnect.)

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anigbrowl 12y ago
A corollary to that is that even if you work out the legal obstacles (it's possible to get a tax ID and even start a company without having legal status), it's difficult to accumulate the seed capital if you can't work a regular job. That'a s bit less of an issue for people in tech startups - if you already have a laptop and internet service, then you may not need any additional physical capital - but it can be a huge barrier in other lines of business where you may need to invest in a fair amount of equipment in order to be basically competitive. Say someone wants to start a photography business, for example, which is pretty lightweight sort of business - you're still looking at maybe $10k of gear and a year of studio/office rental expenses, potentially much more. You don't have to go that route to succeed as a photographer, but absent that starting capital it's going to take considerably longer to get established. And while that's not a huge amount of money, many immigrants don't have access to credit or jobs that pay enough to accumulate savings.

schnable 12y ago

Much of what we are seeing is the effect of our insane visa and immigration policies. The traditional entrepreneurial spirit of the United States was driven by the culture of immigrants. Over 40% of the companies on the Fortune 500 were founded by immigrants or the children of immigrants. These were once disruptive startups. Now we make it very difficult for talented and intelligent people to become permanent residents. So instead they stay home, or maybe go to Canada or Australia.

_delirium 12y ago
Has the number of people becoming U.S. permanent residents or naturalized citizens actually declined, relative to the times those Fortune 500 companies were founded? As far as I can tell, it hasn't: somewhere around 1 million new permanent residencies are granted per year in the 2010s, versus ~250,000 in 1960, which is actually about twice as many relative to population (~0.3% of population annually now, up from ~0.15% in 1960). Sure, there are many more people wanting to become PRs than are granted, but immigration has been gradually expanding since the low of the 1930s/40s, not contracting. It's true that immigration was freer prior to the 1930s, but today is better than any other time post-WW2, in terms of the % of the population that is foreign-born, the # of naturalized citizens, the # of permanent residencies granted, etc.
- yvsong 12y ago
  Most green cards today are family-based instead of employment or skill based. Family is a golden word in America, according to the Godfather: "But don't ever take sides with anyone against the Family again." In addition, there are many diversity (lottery), refugee, and asylum green cards. It's funny while America is hated, and some other countries are touted to have better systems and will soon take over America's leadership, tons of people are voting for America with their feet, and crying for green cards.
bluedino 12y ago
We have 7-20 million illegal immigrants in the USA out of 313 million total residents. How difficult can it really be to stay?

AndrewKemendo 12y ago

So where is there a better environment for entrepreneurship? I don't mean theoretically, I mean in practice. Is there a country that has better infrastructure, capital markets, regulation and market size? I am genuinely curious.

michaelq 12y ago
Based on the criteria you mention (infrastructure, capital markets, regulation and market size), there most certainly isn't one. The other large countries have more onerous regulations and worse infrastructure than the US does. But it's clearly not enough to say "the US isn't as bad as everywhere else" if everywhere else is merely drifting toward consolidation more slowly.

debt 12y ago

The compensation packages that tech companies are offering are outrageous. Coupled with the fact that money itself generates better returns than most startups. Earning 10% a year over 10 years in some mutual fund is way better than investing in some startup that'll be around for likely less than two years. The housing market in the Bay Area is exploding. The salaries are going to have to keep up somewhat with that explosion. Why would I run a startup making 50k in Chicago, when I can make more than triple that(with RSUs, options, ESPP, healthcare, etc.) in the Bay Area? Also, keep in mind the ground beneath us is shifting constantly. Some web app written in Backbone yesterday may be slow as farts today. Objective-C, what's that? CSS? Use SASS. Chef? Use Docker. I mean use AWS. I mean use Digital Ocean. I know it seems meaningless what technologies you use, but these are the margins which people win by; the ability to be fast and scale quickly. Those are just two aspects of probably a million other really important aspects in running a successful startup. Again, though, you have to work normal hours(so as not burnout) while paying yourself enough to survive(forget the Bay Area). It's just not worth it to run a startup given the economics. Unless you can secure a shit ton of upfront investment. Which is unlikely unless the investor feels your startup idea could at least outperform some other investment vehicle like a mutual fund.

itisbiz 12y ago

"Revitalization" might be better word than "disruption" to explain what is required of corporate sector. But corporate sector is adopting "disruptive" technologies and methods such as cloud, analytics, ecommerce. The problem is it is incremental and interstitial rather than comprehensive.

ryanmarsh 12y ago

For the purposes of this discussion we should dispense with the word "startups" and replace it with "new businesses". Since 1970 the rate of new businesses has been falling. Gee, can anyone else think of reasons why that might be besides immigration and housing rates in the bay area? What a bunch of navel gazing. Perhaps there is a causal connection with population age? What about other factors? What if we zoom out a bit and look at general workplace productivity factors and the impact of technology? Yes, that old crusty stuff they are currently using which you don't consider technology. It's actually a lot better than how things were done before, and before that, and before that too. And what about the rising number of old companies? Look at different industries such as air travel, raw materials, and manufacturing. What I see is Standard Oil all over again, consolidation, incremental optimizations, with a little anti-competitive behavior thrown in to boot. That's sometimes the problem with us programmers, especially the more naive amongst us. We often believe that File > New is the answer to the world's problems when incremental optimization often is more pragmatic (and as the market shows us, more effective). It isn't sexy but it "works". I don't know much about Home Depot but I'm going to guess that they got as big as they did (mostly) by introducing optimizations into the marketplace for home improvement products. They are not a monopoly (such as taxi services) that was created by and protected through legislation and can dissolve rather quickly (like it did in Houston this week) with a change in public support. The tech "startup" community should stop looking at companies like Wal-Mart as evil and start to respect and marvel at the massive amounts of muda they have been able to eliminate from product supply chains. Just because they don't use Node.js doesn't make them disruptable (yes, I'm aware Wal-Mart actually does use Node). </rant>

wuliwong 12y ago
I agree with your overall sentiment. BUT, regarding Wal-mart, Home Depot and other large corporations; they certainly have benefited by lobbying for a better economic playing field for very large corporations. They also have attained their success and market share through innovations, optimizations and seized opportunities. I see it as a lot more complex than Wal-mart is "evil" or not. My position is that it just isn't that simple.
DavidAdams 12y ago

PaulHoule 12y ago

I think the promulgation of the idea of "disruption" is itself an anti-disruptive force. The Microsofts of this world have seen the Kodaks and Xeroxes go down, so we see them doing bold things. For instance, Microsoft saw tablets as a threat to the PC, and they didn't let the fact that their customers didn't see it this way from releasing Windows 8.

wuliwong 12y ago

Does anyone see all the data cited in the article as only kinda tangentially related to what seems to be the main idea of the post? Isn't it possible that "corporate america" is being disrupted AND their are less new companies being formed? It seems simple enough to prove, if only 5 new companies started this year and all 5 grew to be as large as Google, that would be some serious disruption. I am not arguing that their thesis is wrong, it just seems their supporting data falls short of proving the case. I think a more telling dataset would be a similar type of time analysis but looking at the top 500 companies by market cap. How many are new? And that might not even really be getting at the author's real point. Because, he's talking about upsetting existing industries. For instance, sure Apple, Google and MS are pretty new. But did they disrupt an industry or just make it through as the winners of a newly minted "tech" industry? I'm actually asking because this question and thesis is genuinely interesting to me.

gaius 12y ago

"Disruption" really means using technology to find loopholes in the law e.g. AirBnB "disrupting" hotels by providing services for people operating unlicensed hotels. Do how do you disrupt a bank? Insider trading? Fraud? Stealing deposits?